Perjury for CARES distribution

I wasn't aware of this case until just this week. Have other folks been following it? 

What do people think? Its so rare that I hear about a participant getting in trouble for a bad self-certification, so I find this one interesting!

I know that likely if lots of other circumstances weren't also at issue the perjury one case likely wouldn't have been brought, but maybe I'm wrong. I know many of you have interesting insight and opinions so was just curious. 

https://www.justice.gov/usao-md/pr/former-baltimore-city-states-attorney-marilyn-mosby-convicted-two-counts-perjury

I doubt the US government prosecutes a false-statement crime beyond outrageous situations.

The indictment’s charge against Marilyn Mosby for her false statements to her deferred compensation plan seem related to other circumstances, including frauds against financial institutions and the US Treasury’s lien for unpaid Federal taxes, with an outstanding balance more than $69,040.

The convict was a Maryland State’s Attorney, Baltimore’s prosecutor.

(Someone who ought to have a deeper-than-common understanding about needs for truthfulness in signing a penalties-of-perjury statement.)

She suffered no reduction in her $247,955.58 [2020] salary.

She was not unable to work because of a lack of child care.

She did not state an interruption in her husband’s income. (Nick J. Mosby is the president of Baltimore’s City Council.)

Her coronavirus-related distributions were $90,000.

The two amounts and the timing suggest an absence of a relation to a coronavirus-related change.

I’ve seen no suggestion that Baltimore’s deferred compensation plan service provider, Nationwide, did anything wrong by processing the participant’s self-certifying claims.

It's still tax fraud, which is a serious matter.  The participant accepted the tax benefits associated with a tax favored retirement plan and then lied to receive additional tax benefits.  I suspect it was to receive a distribution she was not otherwise entitled to and a waiver of the pre-retirement distribution penalty.

I could imagine an IRS agent during an income tax audit wanting to dig deeper into a large increase in income during a tax year and discovering such a fraud.  It's one of those low probability high consequence things. Would someone go to jail over it, probably not, but I'll bet the IRS would make it painful.

In this particular case it sounds like there were multiple other factors contributing to pursing this charge in addition to others. I feel it is unlikely the IRS will challenge most self certification by the participant unless it is egregious if that is the only issue.

Though as LANDO points out, if the IRS discovers it on a tax audit the IRS might strongly pursue the penalties and interest for under reporting if they feel the 10% penalty should also have applied.

Since participants were given a 3 year window to repay CARES act withdrawals as a rollover, I wonder if the IRS position would be more or less severe if the withdrawal was repaid and the IRS determines that the initial distribution did not qualify? That is would they also try to disqualify the subsequent rollover repayment?

Thinking back to 2020, I would hope the IRS would rely on the participant self certification absent clear and compelling evidence that the participant fraudulently self certified.

For practitioners who advise a plan’s administrator, here’s an important point:

A plan is not tax-disqualified because the plan’s administrator relies on a participant’s written certification to the extent that the Internal Revenue Code permits that reliance.

I’ve seen no suggestion that Baltimore’s § 457(b) plan suffers a tax consequence, or even an examination, because the plan’s administrator or its service provider relied on Marilyn Mosby’s self-certified claim.